Carter Unveils Plans To Aid Auto Industry

By Dan MorganJuly 9, 1980

President Carter today announced a major package of regulatory, tax and trade measures to provide at least $1 billion in relief to the nation's ailing auto industry during its changeover to small, fuel-efficient cars.

The unveiling of a new package took place almost under the noses of Republicans assembling here for next week's national convention, and brought a charge from GOP Chairman Bill Brock that Carter's stopover was politically motivated.

But in outlining a series of steps that had seemed unlikely two months ago, the president said he was acting mainly out of deep concern over the high unemployment rate among auto workers, 239,000 of whom were laid off in June.

Although the package announced here today falls short of the industry's demands for regulatory relief and protection against foreign imports, administration officials described it as a significant move toward more active government involvement in the industry.

"We're all in this together," said the president, who was flanked by top officials of five U.S. auto companies and the United Auto Workers union during an early morning airport news conference en route to Japan.

An important aspect of the president's plan is establishment of a permanent auto industry committee made up of representatives of business, government and labor.

Stuart E. Eizenstat, the president's domestic adviser, said that this group might serve as a "model for industrial policymaking in the 1980s," taking up issues and "identifying roadblocks to reindustrialization."

"We're taking a page out of the Japanese book. We've got to cooperate," said Chrysler Chairman Lee Iacocca.

These sentiments were echoed by Ford Chairman Philip Caldwell, who said that "the greatest lesson from the Japanese is to have government, industry and labor all working together."

Initial reaction to the president's new steps from business, labor and consumer spokesmen was cautiously positive.

UAW President Douglas Fraser, whose support for Carter in the fall campaign is seen by White House political aides as crucial, said it was a "good first step."

Though Fraser made no political promises, he said the administration action showed that "at least there is now a continuing concern" on its part.

However, other sources acknowledged that there have been sharp divisions in the administration over the approach to the continuing problems of the auto industry -- problems that result from the recession, high interest rates and a flood of foreign imports.

Sales of new U.S. cars peaked in 1978 at 9.3 million, and dropped to an annual rate of 5.5 million in the most recent financial quarter. In addition to unemployed auto workers, 450,000 people in industries supplying the car companies are now jobless.

Imported cars made up 28.4 percent of U.S. car sales in May, compared with 17.7 percent in all of 1978.

Nevertheless, there has been a reluctance on the part of some administration officials to protect the U.S. auto industry.

Trade officials have argued that trade sanctions would interfere with American efforts to open Japan market to U.S. electronics and auto parts, and ultimately would weaken the competitiveness of U.S. automakers.

On the trade front, Carter promised today only that he would seek a quick ruling on a UAW petition for trade sanctions against Japanese imports.

The UAW wants the International Trade Commission to determine whether Japan's car exports have seriously injured the U.S. auto industry. If the ITC finds, that they have, it can recommend that Carter impose quotas or other trade sanctions.

Under an accelerated process approved by the president, the ITC findings could be ready by October, at the height of the campaign, when the president could be under maximum pressure to bow to protectionist demands by the industry.

Industry and political leaders in Michigan said today that the speeding up of action on the UAW's petition was a signal to the Japanese to moderate their exports or face U.S. retaliation.

Michigan's two Democratic senators, Donald W. Riegle Jr. and Carl Levin, described this as a "major breakthrough."

Chrysler's Iacocca, a persisent critic of Japanese trade policy, bemoaned the fact that while hundreds of thousands of U.S. workers are jobless, "Japanese are working Saturdays and Sundays to meet this insatiable [American] demand."

In addition to the possibility of sanctions against Japanese imports, the Carter package outlines action on environmental, tax and community welfare measures.

The industry is expected to save $500 million from an administration proposal to ease a requirement that 1984 model cars meet exhaust-emission requirements at very high altitudes. Officials said the eased standards would still provide full antipollution protection for major cities at high altitudes, such as Denver.

The administration also plans to change the methods of protecting workers exposed to toxic lead and arsenic and to speed up processing of company requests to waive carbon monoxide emission standards for individual engine lines.

In the tax area, the administration is studying the possibility of allowing faster writeoffs on outmoded equipment. Administration officials say they are also keeping an open mind on giving government grants to companies, such as Chrysler and Ford, which wouldn't be helped by writeoffs since they aren't earning enough profits to pay taxes. The tax program if implemented, could save the auto companies $500 million over the next three years.

Also announced today were programs of $200 million to $400 million in Small Business Administration loans to dealers and $50 million in aid to communities hit hard by the slump in auto production and sales.

Ralph Nader, consumer advocate, said his initial assessment of the program was that "the consumer and tax-payer could have fared worse."

"By and large this is a responsible position -- they could have given a whole series of crutches to the industry, which would only have turned it into more of a cripple. When the industry knows it can't use Washington as a scapegoat, they'll roll up their sleeves and shape up."

Carter said at the Detroit stopover that his administration is as committed as ever to maintaining environmental and safety standards.

Spokesmen for the U.S. auto industry have repeatedly blamed government regulation for many of their problems.

However, some administration officials were reported to have been stunned by an internal report drawn up by the Office of Management and Budget showing that 84 percent of the new costs atributed to government regulations were related to fuel efficiency. The conclusion was that most of these costs would have been incurred anyway in the fight to lure buyers to U.S. cars.

Most of the program announced today was drawn from a memorandum of recommendations submitted by Goldschmidt to the president June 30.

In addition to the four major U.S. auto companies, General Motors, Ford, Chrysler and American Motors, Volkswagen's U.S. company was also represented at the closed-door meeting with the president early today.

Later, Volkswagen's president, James McLernon, said that Carter's package showed that "the decade of the 1980s will be different from the 1970s in terms of cooperation between industry and government in the United States."'